CH2M Hill is an "engineer-procure-construct" company offering a wide range of services to industries and governments. According to its annual report, the company is based in Englewood, Colorado and has approximately 25,000 employees worldwide.[1] Although CH2M Hill promotes its image by advertising its government contracts in Iraq and in New Orleans after Hurricane Katrina,[2] it is heavily focused on privatizing public infrastructure and waste systems for local and state governments. It has been criticized for its "contract cities" or "outsourced cities" and its expansive model of privatization of government services.[3] For the 12 months ended December 31, 2014, the company's total revenue was $5.14 billion, and its net income was a loss of $181.5 million.[1]

PROFITS AND OWNERSHIP: CH2M Hill's net income for the 12 months ended December 31, 2014, was a loss of $181.5 million, while its total revenue was $5.14 billion.[1]

BUSINESS MODEL: CH2M Hill works on a range of projects, from water treatment (sewage sludge) and pollution abatement, in addition to city infrastructure design and energy system management.[4] CH2M Hill has three main divisions: "Water, Energy & Facilities," "Government, Environment & Infrastructure," and "International."[5] The two domestic divisions divide up the services CH2M Hill provides for both governments and private clients.

Energy, Water and Facilities: This division consists of services including energy management, water supply decontamination and decommissioning.

Government, Environment & Infrastructure This division consists of services including constructing public buildings like airports, consulting for urban planning, and running local governments such as those in its contract government program.

International: CH2M Hill has been involved in a variety of international projects, including developments in Saudi Arabia, and was one of the major contractors for the 2012 Olympics.[6][7]

OMI is a subsidiary of CH2M Hill that runs most of its operations and its maintenance of water and wastewater programs. It initially provided operations and maintenance consulting services, but then evolved to provide contracted services to "managing water and wastewater systems, including laboratory management, industrial pretreatment program management, meter reading, and billing and collection." [8] In the 1990s, the company expanded its services to provide industrial utility management and waste remediation services, as well as complete public works management. In 2005, the company once again expanded to start providing services to "manage an entire community or city," the start of CH2M Hill's contract government services, according to the company website.[9]

FOUNDING: CH2M Hill was founded as CH2M in 1946 in Corvallis, Oregon by three students from Oregon State University and their civil engineering professor, with the intent of providing engineering and consulting services, according to the company website. In 1971, CH2M merged with Clair A. Hill & Associates, a Redding, California company, after collaborating on a wastewater treatment facility.[4]

Controversies

Outsourced Cities and Privatization of Government Services

Georgia Towns Sign Contracts to Outsource Huge Array of City Services

Al Jazeera's "Inside U.S.A. Privatised Cities," from October 17, 2008

As explained in an Al Jazeera news report, in 2005, CH2M Hill subsidiary OMI signed a contract to manage all of the municipal services -- except fire and police -- with Sandy Springs, Georgia, a newly-incorporated suburb of Atlanta that spun off from Fulton County. In the next two years, the newly-incorporated towns of Johns Creek, Milton, and Chattahoochee Hills followed suit, also signing contracts with CH2M Hill to establish fully outsourced cities.

In Sandy Springs, where the company managed the entire municipal staff, CH2M HILL employees wore Sandy Springs uniforms and drove trucks with Sandy Springs emblems. CH2M Hill was in charge of all government services, including everything from road paving and grass cutting to issuing permits, running municipal courts, and enforcing ordinances and parking regulations. Most of the work is done by temporary workers hired by subcontractors.[10][11][12]

Another Georgia town, Johns Creek, also hired CH2M Hill/OMI to run the local government. Initially, there were only seven officials who worked directly for taxpayers. The other 108 employees were hired by CH2M Hill/OMI or its subcontractors.[11]

In 2010, two of the Georgia towns that were part of CH2M Hill's initial experiment to privatize public infrastructure cut ties with the company.

In Milton, Georgia, the local government had hired CH2M Hill to collect garbage, draw zoning maps, and conduct daily government tasks. Three years later, in January 2010, Milton cancelled its contract, citing budget restrictions. Ending its partnership with CH2M Hill would save the town an estimated $1 million per year. It brought some services in-house, and also contracted with other providers.[13]

Eight months later, Johns Creek also cut its contract with CH2M Hill, citing budget concerns as well. It reduced the contract from $17 million in 2010 to $5 million in 2011.[14]

In 2011, Sandy Springs "gave [CH2M Hill] the boot . . . in favor of the low bidders for the various city contracts," Al-Jazeera reported. The town remains largely privatized, but split its service contracts up among multiple vendors, rather than just entering into a contract with a single corporation.[15]

In July, 2008, the City of Centennial, Colorado implemented the largest privatization of public works in the country, contracting with CH2M HILL for almost all public works services. The 100,000-person city incorporated in 2001, initially contracted with neighboring Arapahoe County to provide services, but in 2008 entered a five-year contract with CH2M Hill to operate everything from transportation, to traffic engineering, to infrastructure maintenance and snow removal.[16][17] (This is in contrast with cities like Sandy Springs, which were privatized from the beginning). The city renewed its contract with CH2M Hill in 2013, with a $53 million agreement now set to run through June 30, 2018. [18]

CH2M Hill Fights Open Records in Louisiana

That same year, CH2M Hill was also part of a similar conversion from public to private in Central, Louisiana, another newly-incorporated city.[19] In 2010, the newspaper Central City News filed a lawsuit alleging that CH2MHill “was subject to Louisiana’s Public Records Law, because the company was functioning as the City of Central and performing sovereign acts on behalf of the city,” and therefore violated the law by refusing to comply with requests. The 1st Circuit Court of appeals reversed a lower court decision denying access to the records, remanding the case for a hearing on whether CH2M Hill was considered an "instrumentality" of Central’s government, thus making it subject to the state’s public records law. In October 2013, the newspaper settled the case, with CH2M Hill agreeing to turn over records. [20][21]

Pushing the Privatization of Government Services on the West Coast

In 2012, CH2M published a report for the West Coast Infrastructure Exchange, a partnership between California, Oregon, Washington, and British Columbia that illustrated the wide array of services that can be privatized, and promoted the involvement of private companies in the public infrastructure.

The report maps out an implementation plan to remedy the perceived infrastructure deficiencies of the Pacific Northwest in order to help the states to transition from public infrastructure systems to privatized ones. In California, the goal is to privatize transportation, energy grids, and water/sewer systems, and then move on to schools and public buildings.

In Washington, the report suggested starting by privatizing schools, public buildings, energy efficiency projects, and water/sewer systems, with transportation being the long term goal.

And finally in Oregon, systems had already been put in place to improve the Long Beach Courthouse, school systems, and water supply systems. The goal there was to expand privatization to areas like hospitals, transportation, and telecommunications (pp. 98-100).[22]

"In March 2004, it was announced that city of East Cleveland and OMI/CH2M Hill were canceling a contract to operate and manage the city’s water and wastewater systems and services. OMI/CH2MHill, in keeping with industry custom, blamed the city, specifically charging that East Cleveland failed to pay for services. The city shot back that OMI had failed to generate enough revenue for the city to pay its $300,000 per month operating fee.

The falling out between the company and the city followed a report by the Ohio State Auditor in 2002 that found OMI had promised more than it delivered in the first place, and specifically that the company had overestimated how much revenue it could get from operating the system.

Meanwhile, a federal indictment unsealed in January 2005 charged that a consultant working on behalf of CH2M Hill, OMI’s corporate parent, bribed then- East Cleveland mayor Emmanuel Onunwor in order to retain OMI’s contract with the city." [23]

Despite evidence in 2002 that CH2M/OMI were failing to deliver, the city kept its contract with the company for the next two years -- thanks to bribery. According to a federal indictment unsealed in January 2005, CH2M Hill paid consultant Nate Gray as much as $10,000 a month during the period it was operating the East Cleveland water system, and Gray bribed then-East Cleveland mayor Emmanuel Onunwor to keep the company's contract. [24]

In 2002, Onunwor convinced the city council to award a no-bid, $3.9 million contract for CH2M Hill to manage the city's water and sewer systems. [25]

CH2M Hill claimed to have no idea that Gray was paying bribes to Onunwor.

Nine people, including Gray and Onunwor, were indicted on federal racketeering charges. Onunwor drew a 108-month sentence and was ordered to pay East Cleveland $5.1 million in restitution, and Gray was sentenced to 15 years.[25]

In June 2007, CH2M landed a five-year, no-bid contract with Traverse City, Ohio to manage their wastewater treatment plants. The point person for the contract negotiations, Traverse City Manager Richard Lewis, promptly landed a job with CH2M Hill, after 17 years as City Manager.[26] The similarities with the East Cleveland case -- a no-bid contract with big benefits for the proponent -- raised eyebrows in Traverse City.

"It's cause for concern when the company you're doing business with" is connected to a racketeering case, Traverse City Commissioner Barbara Budros told the Traverse City Record-Eagle at the time.[26]

"It's one of those red flags that says we really need to look at our contract when it comes around for renewal," Budros said. "I'm not saying there's been anything nefarious with our contracts with OMI, but it just says to me we need to take a good look at that when it comes around."

In the end, the city kept its contract with CH2M Hill.

In July 2013, as five or six children played in Traverse City's new waterpark attraction, a CH2M Hill-operated wastewater system backed up and rerouted toilet water into the waterscape. According to the Traverse City Record-Eagle, "water in the reservoir was cloudy, tinted, and contained floating debris." [27]

Hanford Nuclear Project Mired in Scandals

CH2M Hill's biggest job, about four percent of total business, is a federal government contract to clean up the Hanford Nuclear Reactor Site in Washington State, with much of the work funded by stimulus dollars. The site is a mostly decommissioned nuclear production complex on the Columbia River that was a part of the Manhattan Project, and between 1944 and 1989 produced 74,000 tons of weapons-grade plutonium-239 (including the plutonium used in the bomb detonated over Nagasaki). CH2M Hill has been the lead contractor for the cleanup of the central plateau -- one of three cleanup zones at the Hanford Site, home of the Plutonium Finishing Plant -- since 2008.[28][29]

The cleanup was largely funded by federal stimulus dollars, with at least $1.961 billion from the Recovery Act of 2009 earmarked for the site. CH2M Hill and other contractors began meeting with the Department of Energy as soon as the stimulus bill started to be discussed. The proposal to use stimulus funds to clean up nuclear sites in Washington State and around the country was carried forward by Sen. Patty Murray (D-Wash.), [30] who received $16,000 in campaign contributions from CH2M Hill employees and PACs in the 2009-2010 election cycle; this made her the third-highest recipient of the company's campaign contributions during that period. [31]

According to the federal government website Recovery.org, CH2M Hill Plateau Remediation Company (the subsidiary contracted for the Hanford site work) received nearly $1.4 billion in stimulus funds, as of the third quarter of 2012.[32] This was the second-largest single contract awarded nationally under the Recovery Act. [33]

CH2M Hill's involvement in the Hanford project has been mired in scandals, including safety violations, kickbacks, and fraud:

Time Card Lawsuit: In September 2012, the U.S. federal government became involved in a False Claims Act lawsuit alleging that CH2M Hill over-billed the government for the number of hours worked at the Department of Energy’s (DOE's) Hanford Nuclear Site. [34]

CH2M Hill allegedly hired employees for eight-hour shifts but allowed them to leave early, because it was reportedly unable to recruit workers otherwise without losing a profit. CH2M Hill then submitted the falsified timecards to the federal government. The Justice Department alleged that upper management knew about the practice but failed to stop it.

CH2M Hill settled the case by agreeing to pay $19 million (including a $16.55 million civil penalty; disgorgement of $1.95 million in profits, and $500,000 to improve accountability systems at Hanford). The settlement also included a three-year non-prosecution agreement, the hiring of a corporate monitor, and an agreement they would cooperate with the government’s ongoing fraud investigation. CH2M Hill agreed to a statement of facts that it had committed federal criminal violations. [34][35]

Fine for Kickbacks: Between 2003 and 2005, two CH2M Hill employees allegedly fleeced taxpayers by making over 200 purchases of substantially marked-up goods from companies owned and run by the employees' spouses, then charged the cost to the DOE. Despite being alerted by internal audits to the misuse of federal funds, CH2M failed to address the issue, allowing these schemes to go undetected for years. Four individuals were indicted on charges of fraud. CH2M Hill agreed to pay $1.5 million to settle the allegations.[36][37]

Radioactive Waste Spill: In June 2008, the DOE issued a Preliminary Notice of Violation (PNOV) to CH2M Hill Hanford Group, Inc. pursuant to an investigation of a July 27, 2007 radioactive waste spill. CH2M Hill was found to have committed nine nuclear safety violations of Nuclear Safety Management and Occupational Radiation Protection. According to the PNOV, "it was only mere chance that prevented personnel from being directly contaminated by significant quantities of tank waste . . ." These violations came with a proposed civil penalty of $302,500.[38]

Radioactive Safety Violations: In March 2005, the DOE’s Office of Price-Anderson Enforcement at the Hanford Tank Farms issued the CH2M Hill Hanford Group a Preliminary Notice of Violation (PNOV). CH2M Hill was cited for four violations: (1) a June 2003 multiple personnel contamination event; (2) a November 2003 Technical Safety Requirement during a cross-site waste transfer; (3) a November 2003 valve position error during waste retrieval operations; and (4) a July 2004 extremity exposure during thermocouple removal activities. The DOE found CH2M Hill supervisors to be directly associated with or responsible for decision making that led or contributed to several of the events. CH2M Hill was required to pay a civil penalty of $316,250.[39]

Beryllium Safety: Concerns were also raised that CH2M Hill was ignoring evidence that it was exposing employees to beryllium, a by-product of the nuclear industry that can cause a debilitating and deadly respiratory disease. Managers allegedly refused to honor work restrictions for beryllium-sensitized workers. When Mary Sams, a head nurse at the site, tried to document how CH2M Hill was trying to remove the work restrictions, she was fired. This story was covered by ProPublica, which showed that a crush of hiring and a lack of training may be exposing workers at the facility to beryllium dust. [40]

Formaldehyde in FEMA Trailers

After Hurricane Katrina ravaged the United States Gulf Coast in 2005, CH2M Hill entered into contracts with federal and state governments worth hundreds of millions to assist with the cleanup and recovery effort.

FEMA trailers

CH2M Hill was one of several companies to be awarded a no-bid contract to install or maintain Federal Emergency Management Agency (FEMA) trailers to provide temporary housing for hurricane victims. [41] A review from the Department of Homeland Security's Office of Inspector General found that the $400 million in no-bid temporary housing contracts awarded to CH2M Hill, Shaw Environmental Inc., Bechtel Corp., and Fluor Enterprises Inc. wasted at least $45.9 million in taxpayer dollars. [41]

The trailers later turned out to contain formaldehyde, and exposed the hurricane victims to toxic fumes. Residents of Louisiana, Mississippi, Alabama and Texas brought a class action lawsuit against CH2M Hill and others for their injuries.

In May of 2012, CH2M and three other contractors (Shaw Environmental Inc., Bechtel Corp., Fluor Enterprises Inc.) that installed or maintained the government issued trailers agreed to pay $5 million to settle the case against them. [42] The overall case settled for $42 million in September 2012. [43]

Violation of Clean Water Act

In January 2006, a CH2M subsidiary “entered into a Deferred Prosecution Agreement (DPA) with the office of the United States Attorney for the District of Connecticut. The DPA relates to a previously disclosed investigation of a Clean Water Act (CWA) violation at [two] wastewater treatment facilities in Connecticut. Pursuant to the DPA, [the] subsidiary will contribute $2.0 million to community projects and take other agreed upon steps to enhance CWA compliance procedures at the two wastewater treatment facilities in Connecticut...The violation related to failure to comply with sampling and reporting requirements of the CWA and there is no evidence the violation resulted in harm to human health or the environment.”[44]

Alaska Fish Hatchery Delays and High Costs

CH2M Hill was hired by the state of Alaska to build the Ruth Burnett Sport Fish Hatchery. The project was intended to be completed by 2009, but the fish hatchery was not functional until 2013 due to construction delays and issues with the water filtration system. It ended up costing the state $50 million, twice as much as originally projected. The state finalized a settlement costing CH2M Hill $2.9 million, which removed the contractor from any liability at the time but left liability of future claims open.[45]

LA Utility Controversy

In 2007, CH2M Hill was accused of over-billing the Los Angeles Department of Water and Power by $3.3 million on contracts to control dust on the dry bed of Owens Lake. An audit "found that CH2M Hill allowed subcontractors to pass on improper markups for services to the department. The audit also found that the company lacked effective oversight of cost controls, subcontractor management and construction management," the Denver Post reported. [46] In 2008, the department filed a lawsuit against CH2M Hill for $13.5 million, plus punitive damages and $10,000 for each false claim submitted by the contractor. The lawsuit accused CH2M Hill of breach of contract, fraud, and providing negligent representation.[47] The lawsuit was settled in July 2009 for an undisclosed amount.[48]

Sewer Tunnel Explosion

In May 1989, CH2M Hill was fined $470,000 by OSHA as one of two contractors involved in a methane gas explosion that killed three workers in a sewer tunnel project, citing safety and health violations. They were cited for 47 willful violations, which are the most serious issued by OSHA and are based on a finding that the contractors knew that a dangerous condition violated safety standards but made no effort to correct it.[49]

Involvement in the Toxic Sludge Industry

According to the CH2M Hill website, it is "the industry’s leading wastewater firm," featuring such services as "residuals management." It later specifies that, by "residuals," it means "biosolids,"[50] which itself is a euphemism for toxic sewage sludge. Sewage sludge is used on food cropland. Sewage sludge can contain such hazardous chemicals and pathogens as Dioxins and Furans, Flame Retardants, Metals, Organochlorine Pesticides, 1,2-Dibromo-3-Chloropropane (DBCP), Naphthalene, Triclosan, Nonylphenols, Phthalates, Nanosilver, and thousands more substances.[51]

In August 2013 CH2M Hills was awarded an $80 million contract by the San Francisco Public Utilities Commission (SFPUC) to provide planning and engineering services for the Southeast Plant Biosolids Digester Facilities Project, a $1.5 billion capital investment to upgrade San Francisco's wastewater system.[52]

CH2M Hill is a leader in this field. Todd Williams, CH2M Hill's "Global Technology Leader for Residuals Resource Recovery and Biosolids," is Chair of the Water Environment Federation's (WEF) "Residuals and Biosolids Committee."[53] The WEF is the sewage sludge industry's main trade, lobby and public relations organization, with over 41,000 members and a multi-million-dollar budget that supports a 100-member staff. In a PR contest in June of 1991, WEF chose the euphemism "biosolids" in order to avoid the negative connotations associated with the word "sludge."

Violation Tracker

Discover Which Corporations are the Biggest Violators of Environmental, Health and Safety Laws in the United States
Violation Tracker is the first national search engine on corporate misconduct covering environmental, health, and safety cases initiated by 13 federal regulatory agencies. Violation Tracker is produced by the Corporate Research Project of Good Jobs First. Click here to access Violation Tracker.

Political Activity

CH2M Hill spent a total of $480,000 lobbying at the federal level in 2014, and $5,075,659 in total on federal lobbying since 1998, according to the Center for Responsive Politics.[54] The company has lobbied on issues including natural resources, transportation, federal budget and appropriations, energy and nuclear power, environment and superfund, air and water regulation, roads and highways, and taxes.[55]

CH2M Hill made $473,361 in political contributions for the 2014 election cycle to candidates at the federal level, including to candidates, PACs, and parties, with donations almost evenly split between Democrats and Republicans (53 percent to Democrats and 47 percent to Republicans).[54] Of money donated to candidates for U.S. Congress, 94 percent had been given to incumbents.[56]

In 2012, the company made $648,694 in political contributions to candidates at the federal level, including to candidates, PACs, and parties, with donations evenly split between Democrats and Republicans.[54][57]

Between 1998 and 2013, the company and its employees made nearly $4.8 million in political contributions to federal candidates.[54] The company’s political action committee raised $476,910 and spent $463,025 on federal races in 2012.[58]

At the state level, CH2M Hill has spent nearly $1.2 million from 2003 to 2012 on candidate contributions, party committees, and ballot measures.[59] The company hired 81 lobbyists in 16 states during the same time period, to lobby for privatization of public services.[60]

Corporate Subsidies

According to "Subsidy Tracker," a project of Good Jobs First, CH2M Hill and its subsidiaries have received 31 subsidies for over $18.8 million in tax credits/rebates, cost reimbursement, and grants from the federal government as well as state and local governments. [61] The top five states for state/local awards are: Washington, Texas, Colorado, Wisconsin, and New Mexico.[61]

"Risk Factors" in SEC Filings

In its SEC filings, CH2M Hill cites several aspects related to government funding and regulation of the international construction services sector as “risk factors” that may affect its business and future prospects. These risk factors often show the incentives the company has to influence public policy and the direction its advocacy would take. Among these are changes in the U.S. government's spending priorities and environmental regulations.[62]

In 2014, CH2M Hill noted that approximately 21 percent of its total revenues are from contracts with the U.S. federal government, and that its ability to earn revenues on existing and future projects depends on the "availability of funding from U.S. federal government agencies."[1]

The company also states that environmental regulations and related compliance investigations could adversely affect its revenues:

"Our business involves significant risks including the assessment, analysis, remediation, handling, management and disposal of hazardous substances. As a result, we are subject to a variety of environmental laws and regulations governing, among other things, discharges of pollutants and hazardous substances into the air and water and the handling and disposal of hazardous waste including nuclear materials and related record keeping requirements. These laws and regulations and related investigations into our compliance, as it pertains to facility operations and remediation of hazardous substances, can cause project delays and, substantial management time commitment and may significantly add to our costs."[62]

Personnel

Chief Executive Officer

Jacqueline Hinman, CH2M Hill CEO

Jacqueline Hinman became president and CEO of CH2M Hill in 2014, after serving president of CH2M HILL's International Division from 2012 to 2014. Hinman is "one of the only women to run a major U.S. engineering firm," according to the Denver Post.[63] She was elected to chair CH2M Hill's board in July 2014.[64]

Hinman had previously overseen the Major Programs Group, which according to CH2M Hill's website was involved in a number of international events, including the 2016 Rio Olympics and the MASDAR sustainable city in Abu Dhabi.[65] The Denver Post wrote in a 2013 story about Hinman that "[o]ne of her biggest projects to date was directing the firm's engineering and construction management of the 2012 Summer Olympics in London."[66]

Hinman's total compensation as chairman of the board and CEO in 2014 was $1,687,604.[67]

Former CEO Lee McIntire

Lee McIntire, CH2M Hill Chairman and Former CEO

Lee McIntire was the CEO and Chairman of CH2M Hill from January 2009 to January 2014. He remained Executive Chairman of the CH2M Hill Board of Directors until July 2014.[68] Prior to his appointment as CEO, he served as Chief Operating Officer, President and Group Chief Executive for the Energy Client Group, and the President and Group Chief Executive for the Industrial Client Group. McIntire received total compensation of $4.9 million in 2013.[69] In 2012, McIntire's annual salary was $1.5 million. He also received a bonus of $1.2 million, $4.9 million in stock awards and options, and $735,467 in other compensation, resulting in total compensation of about $8 million.[70]